Changes in net working capital

Question

Quizplus · Accepted Answer

Changes in net working capital can affect the cash flows of a project every year of the project's life, as they represent changes in current assets and liabilities that affect the cash balance. Therefore, they need to be included in project analysis to accurately reflect the project's financial performance. Option A is incorrect because changes in net working capital can represent either cash inflows or outflows, depending on the nature and timing of the changes. Option B is incorrect because changes in net working capital can affect the cash flows of each year of the project, not just the initial year. Option D is incorrect because changes in net working capital are relevant to project analysis and can impact the project's cash flows. Option E is incorrect because changes in net working capital can impact the cash flows of all years and not just the initial and final years.

Changes in Net Working Capital